That's the question I found myself asking through reading this Bloomberg News article, which seems to suggest that is the case:
“After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility,” [International Monetary Fund Deputy Managing Director] Naoyuki Shinohara said. “The global outlook remains unusually uncertain and downside risks have risen significantly.”
The escalation of Europe’s debt crisis forced the European Union and the International Monetary Fund to offer as much as 750 billion euros ($897 billion) to countries in danger of financial instability. Asian governments said last month public debt risks and “destabilizing” capital flows are among threats to the region’s recovery.
“Should the recovery continue as expected, Asia’s bright growth prospects, together with low interest rates in major economies, would likely attract more capital,” Shinohara said. “This could lead to risks of overheating in some economies if appropriate policy action is not taken. On the other hand, further increases in global risk aversion could see capital flows change direction quickly.”
It's not so much that I disagree
with the premise -- there are certainly plenty of reasons globally to think about risk to the overall economy.
What I'm really wondering is: Are we just more risk averse as a result of the recent recession?
I'm nearly finished with Michael Lewis' bestselling account of the global recession, The Big Short. What I noticed more than anything throughout the book is that everyone other than the handful of savvy investors and analysts he chronicles in the book seemed to look the other way despite the mounting signs that the subprime mortgage market would collapse after the two-year teaser rates of mortgages passed.
They were unwilling to adjust their models to consider risks that to them seemed "extraordinary", but were obviously sensible (considering that they happened).
So when I see Shinohara say that the outlook is "unusually uncertain" and that downside risks are on the rise, I can't help but wonder if this is just a change in social psychology. Is it now more appropriate, or expected, or even fashionable, to sound the alarm to potential major changes in financial markets? Or is there really more risk now?